One significant aspect of managing a rental property that looks to be rather simple is the security deposit. Although truth be told, there are multiple things that Inverness property owners need to understand to handle a tenant’s security deposit correctly. Unlike a rental payment, a security deposit is not part of your investment income. Instead, there are certain directives that you have got to observe to accept, deposit, and reimburse security deposit funds legally. You will equally need to grasp how much to charge and what you can legally and ethically use the security deposit to pay for once the tenant vacates. In this article, we’ll discuss the basics of security deposits so that you can handle them perfectly, from start to end.
Determining How Much to Charge
One of the most consequential decisions that rental property owners need to make before advertising your rental for the first time is how much to ask for in a security deposit. You may be unprepared to know that in many states, there is no stipulated amount; it is normally up to the landlord to decide. But as a matter of fact, there may be limits to how much you can charge, so you should fully go through your state and local laws when choosing a number. Most probably the most typical amount asked of tenants is a sum that is closely the same as one month’s rent, plus maybe a cleaning deposit or pet deposit, if applicable. It’s a brilliant plan to do a lot of research on what other landlords in your area are charging in order to help make your rental rates competitive. Asking for far too much for a security deposit could drive potential tenants away.
Handling Security Deposit Funds
At any moment you have the security deposit funds in hand, you’ll need to totally understand the rules in your state about where to keep them. Some states require landlords to preserve the security deposit in a separate, interest-bearing bank account. At any rate, others offer landlords a range of options of where to keep the funds. But definitely, regardless of where you live, you should keep careful records that note where the funds are held and be aware not to spend them until you have a legal, documented reason to do just that.
When You Can (Legally) Keep Security Deposit Funds
There are a few distinct situations that enable a lot of landlords to keep and use a tenant’s security deposit funds. The most usual is to pay for repairs for damage to the property beyond normal wear and tear. For illustration, a broken appliance, big holes in the walls, or excessively stained carpet may all be ethical reasons to keep a tenant’s security deposit. But at the same time, if that carpet is more than seven years old and you would have replaced it for your next tenant anyway, it is illegal to withhold security deposit funds to pay for the replacement.
Among other ethical reasons to keep some or all of a tenant’s security deposit include cleaning costs, unpaid bills, and in some cases, a broken lease or nonpayment of rent. But indeed, some states do not allow landlords to withhold security deposit funds to cover unpaid fines or late fees, and so again, make sure to get to know the regulations in your location.
Security Deposit Refunds
If your tenant moves out, you will need to settle upon how much of their security deposit will be refunded. If the terms of the lease have been met in full, the landlord’s concern is to return the entire refundable amount of the security deposit to the tenant. This refund must be given within a reliable timeframe in many states, usually within 30 days or less. If you prefer to withhold any portion of the security deposit, it is important to include an itemized list of the repairs that were paid for with the funds.
Even supposing your state doesn’t dictate it, among the best practices of rental property management is to provide clear communication of any funds withheld from your tenant to avoid misunderstandings or, worse, legal action. What’s more, if a property owner withholds the security deposit or an accounting record with a bill for amounts due above and beyond the deposit, longer than the amount of time prescribed by law; that property owner may have to pay the tenant up to three times the amount of the deposit as a penalty.
As you can absolutely see, security deposit issues can be way more complex than they first appear. This is why most rental property owners rely on the expertise of the professionals at Real Property Management Diversified. Our local Inverness property management professionals have broad know-how of the laws in your state. They can help ascertain and secure that you handle your security deposit, rent, and other interactions with your tenant in an ethical, legal manner. Would you like to learn more? Contact us online or call at 352-854-2221 today!
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